Deck 10: Expenditures Processes and Controls Payroll and Fixed Assets

Question 1

For a given pay period, the complete listing of paychecks for the pay period is a:

A)Payroll register
B)Payroll ledger
C)Payroll journal
D)Paymaster

Answer 1

A
Payroll register

Question 2

An integrated IT system of payroll and human resources may have extra risks above those of a manual system.Passwords and access logs are controls that should be used in these integrated systems to lessen the risk of:

A)Hardware failures.
B)Erroneous data input.
C)Payroll data that does not reconcile to time cards.
D)Unauthorized access to payroll data.

Answer 2

C
Payroll data that does not reconcile to time cards.

Question 3

The purchase of fixed assets is likely to require different authorization processes than the purchase of inventory.Which of the following is not likely to be part of the authorization of fixed assets?

A)Specific authorization.
B)Inclusion in the capital budget.
C)An investment analysis or feasibility analysis of the purchase.
D)Approval of the depreciation schedule.

Answer 3

D
Approval of the depreciation schedule.

Question 4

Which of the following is not an advantage of fixed asset software systems when compared with spreadsheets?

A)Better ability to handle non-financial data such as asset location.
B)Easier to apply different depreciation policies to different assets.
C)Manual processes to link to the general ledger.
D)Expanded opportunities for customized reporting.

Question 5

Which of the following is not an independent check within payroll processes?

A)Time sheets are reconciled with production records.
B)Time sheets are reconciled with the payroll register.
C)Paychecks are prepared on prenumbered checks.
D)The payroll register is reconciled with the general ledger.

Question 6

In meeting the control objective of safeguarding of assets, which department should be responsible for distribution of paychecks ad custody of unclaimed paychecks, respectively? Distribution of Custody of
Paychecks Unclaimed Paychecks

A)Treasurer Treasurer
B)Payroll Treasurer
C)Treasurer Payroll
D)Payroll Payroll

Question 7

Which of the following questions would be least likely to appear on an internal control questionnaire regarding the initiation and execution of new property, plant, and equipment purchases?

A)Are requests for repairs approved by someone higher than the department initiating the request?
B)Are prenumbered purchase orders used and accounted for?
C)Are purchase requisitions reviewed for consideration of soliciting competitive bids?
D)Is access to the assets restricted and monitored?

Question 8

The term "ghost employee" means that:

A)Hours worked has been exaggerated by an employee.
B)False sales have been claimed to boost commission earned.
C)Overtime hours have been inflated.
D)Someone who does not work for the company receives a paycheck.
TEST BANK - CHAPTER 10 - MULTIPLE CHOICE

Question 9

A payroll voucher:

A)Authorizes an employee paycheck to be written
B)Authorizes the transfer of cash from a main operating account to a payroll account
C)Authorizes the transfer of cash from a payroll account to a main operating account
D)Authorizes the paymaster to distribute paychecks

Question 10

Which of the following statements about payroll and fixed asset processes is true?

A)Both have only routine processes
B)Both have only non-routine processes
C)Both have routine and non-routine processes
D)Payroll has only routine processes, while fixed assets has only non-routine processes

Question 11

Routine business transactions would include which of the following?

A)Purchase of merchandise inventory.
B)Payment of principal on a note.
C)Purchase of fixed asset.
D)Paying wages and salaries to employees.

Question 12

Internal control problems would be likely to result if a company's payroll department supervisor was also responsible for:

A)Reviewing authorization forms for new employees.
B)Comparing the payroll register with the batch transmittal.
C)Authorizing changes in employee pay rates.
D)Hiring subordinates to work in the payroll department.

Question 13

The purpose of segregating the duties of hiring personnel and distributing payroll checks is to separate the:

A)Authorization of transactions from the custody of related assets.
B)Operational responsibility from the record keeping responsibility.
C)Human resources function from the controllership function.
D)Administrative controls from the internal accounting controls.

Question 14

This type of transaction is one that a business encounters on a regular, recurring basis.The volume of the transactions is so large that transactions and the related accounting activities become second nature to the employees responsible for handling them.Specific authorization for each of these transactions is not necessary.The type of transaction referred to is:

A)Non-routine transaction
B)Payroll transaction
C)Fixed asset transaction
D)Routine transaction

Question 15

Which of the following procedures would be most useful in determining the effectiveness of a company's internal controls regarding the existence or occurrence of payroll transactions?

A)Observe the segregation of duties concerning personnel responsibilities and payroll disbursement.
B)Inspect evidence of accounting for prenumbered payroll checks.
C)Recompute the payroll deductions for employee fringe benefits.
D)Verify the preparation of the monthly payroll account bank reconciliation.

Question 16

Which of the following is not a part of "adequate documents and records" for fixed assets?

A)Fixed asset journal
B)Fixed asset subsidiary ledger
C)Purchase order
D)Fixed asset tags

Question 17

For proper segregation of duties, the department that should authorize new employees for payroll would be:

A)Payroll.
B)Human resources.
C)Cash disbursements.
D)General ledger.

Question 18

Which of the following reviews would be most likely to indicate that a company's property, plant, and equipment accounts are not understated?

A)Review of the company's repairs and maintenance expense accounts.
B)Review of supporting documentation for recent equipment purchases.
C)Review and recomputation of the company's depreciation expense accounts.
D)Review of the company's miscellaneous revenue account.

Question 19

A company's internal controls policies may mandate the distribution of paychecks by an independent paymaster in order to determine that:

A)Payroll deductions are properly authorized and computed.
B)Pay rates are properly authorized and separate from the operating functions.
C)Each employee's paycheck is supported by an approved time sheet.
D)Employees included in the period's payroll register actually exist and are currently employed.

Question 20

Which of the following departments or positions most likely would approve changes in pay rates and deductions from employee salaries?

A)Personnel
B)Treasurer
C)Controller
D)Payroll

Question 21

A company must have systems in place to take care of all activities related to both routine and non-routine processes.The activities would include all of the following, except:

A)Record
B)Summarize
C)Review
D)Report

Question 22

Which of the following types of employees are typically required to prepare very detailed to-the-minute) time reports, identifying the types of projects worked on and the exact time spent on each?

A)Salary employees
B)Production employees
C)Accounting employees
D)Management

Question 23

This document authorizes the transfer of cash from the company's main operating account into the payroll cash account.

A)Payroll register
B)Payroll disbursements journal
C)Payroll voucher
D)Paycheck

Question 24

The policies and procedures that employees following in acquiring and maintaining human resources, capturing and maintaining employee data, paying employees for time worked, and recorded the related cash payroll liabilities and expenses are collectively referred to as:

A)Payroll processes
B)Human resources
C)Salary administration
D)Administrative procedures

Question 25

There are many risks that may affect the payroll and fixed asset transactions.Which of the following is not one of those risks?

A)Recorded transactions may not be valid.
B)Expenditure transactions may be recorded in the wrong account.
C)Valid expenditures recorded properly by the wrong employee.
D)Transactions may not be recorded in a timely manner.

Question 26

Personnel records will typically include all of the following, except:

A)Documentation related to the initial hiring
B)Personal information, such as the employee address
C)Medical history subsequent to hiring
D)Social security number

Question 27

It is necessary for employees to maintain adequate records of the hours worked and the projects worked on.The record of hours worked by an employee for a specific payroll period is reported on a document called:

A)Time ticket
B)Time sheet
C)Salary document
D)Wage report

Question 28

This department is responsible for maintaining records for each job and each employee within the organization, as well as tracking job vacancies and supporting the company's recruitment efforts.

A)Salary and Wage Administration Department
B)Vice President for Employees Department
C)Employee Services Department
D)Human Resources Department

Question 29

When accounting software is used to prepare the periodic payroll, which of the following items is necessary to input for each employee?

A)Employee Name
B)Hours Worked
C)Pay Rate
D)Social Security Number

Question 30

Which of the following would be a correct way to compute the gross pay for an employee?

A)Hours Worked times Authorized Pay Rate
B)Hours Worked times Authorized Pay Rate minus Withholding Taxes
C)Net Pay minus Authorized Deductions
D)Net Pay times Withholding Taxes

Question 31

The payroll process is initiated when:

A)An employee submits his time sheet for the pay period
B)An employee is hired
C)A payroll check is released to the employee
D)A prospective employee is interviewed and given a wage estimate

Question 32

This record, prepared by the payroll department, is a complete listing of salary or wage detail for all employees for a given time.

A)Payroll journal
B)General ledger
C)Employee record
D)Payroll register

Question 33

This record, prepared by the cash disbursements department, provides a listing of al paychecks written, in check-number sequence, with the total supporting the amount of payroll funds to transfer to the payroll bank account.

A)Payroll Disbursements Journal
B)Payroll Register
C)Payroll Journal
D)Cash Disbursements Journal

Question 34

The policies and procedures involved in purchasing property; capturing and maintaining relevant data about the assets; paying for and recording the related assets; depreciation and other expenses; and gains or losses are collectively referred to as:

A)Capital resources
B)Fixed asset processes
C)Property administration
D)Capital procedures

Question 35

The document is prepared in order to map out the jobs and reporting relationships within an organization.This may include only top branches of an organization or may include all positions within the company.

A)Employee List
B)Organization Chart
C)Hierarchy Tree
D)Human Resources Listing

Question 36

Which of the following would be a correct way to compute the net pay for an employee?

A)Hours Worked times Authorized Pay Rate
B)Gross Pay minus Withholding Taxes
C)Gross Pay minus Authorized Deductions
D)Hours Worked times Withholding Tax Rate

Question 37

This item would include explanations concerning the qualifications and responsibilities of each position shown on organization chart.The item is also supported by policies and procedures manuals that outline specific activities performed by each position.

A)Job profile
B)Human resources listing
C)Organization chart description
D)Position description

Question 38

Which of the following is a characteristic of a non-routine transaction?

A)A business encounters this type of transaction on a regular, recurring basis.
B)Required to have specific authorization.
C)Volume of transactions becomes second nature to the employees responsible.
D)Specific authorization for the specific transaction is not necessary.

Question 39

Which of the following correctly lists activities of the Payroll Process in chronological order?

A)Time sheet submitted by employee; time sheet approved; paycheck signed by management; update General Ledger
B)Time sheet submitted by employee; paycheck signed by management; time sheet approved; update General Ledger
C)Time sheet submitted by employee; update General Ledger; paycheck signed by management; time sheet approved
D)Time sheet submitted by employee; update General Ledger; time sheet approved; paycheck signed by management

Question 40

Each of the following items would likely be found in an employee's personnel records related to the initial hiring, except:

A)Employment application
B)Recommendation letters
C)Background investigation results
D)Overtime and commission rates

Question 41

Many companies use independent, internet-based service providers to handle their payroll processing.These payroll providers specialize in offering solutions and constant access to payroll information.

A)Online Software Systems
B)Batch Processing
C)Electronic Timekeeping
D)Outsourcing of Payroll Services

Question 42

This individual is responsible for distributing the signed paychecks on the designated pay day.

A)Human Resources Director
B)Department Supervisor
C)Payroll Department Manager
D)Paymaster

Question 43

Internal control activities within the payroll process, identified as segregation of duties, would include which of the following?

A)Payroll preparation, authorization of new hiring and pay rates, information systems, and general accounting should all be performed by different departments and / or different people.
B)IT controls over computer records and physical controls in records storage areas.
C)The payroll register is checked for mathematical accuracy and agreement with authorized pay rates and deductions.
D)Supervisor approval of time sheets prior to preparation of payroll documents.

Question 44

Internal control activities within the payroll process, identified as independent checks and reconciliations, would include which of the following?

A)IT controls over computer records and physical controls in records storage area.
B)Time sheets reconciled with the payroll register.
C)The payroll register is checked for mathematical accuracy and agreement with authorized pay rates and deductions.
D)Supervisor approves time sheets prior to preparation of payroll documents.

Question 45

Payroll outsourcing has become popular due to all of the following reasons EXCEPT:

A)It offers increased convenience.
B)It offers full protection from internet fraud
C)It offers protection from the risk of liability for failure to submit tax withholdings
D)It offers increased confidentiality.

Question 46

The internal control activity requiring the preparation of a bank reconciliation will minimize the risk of all of the following EXCEPT:

A)Timing issues
B)Stolen cash
C)Fictitious employees
D)Invalid or omitted paychecks

Question 47

Internal control activities within the payroll process, identified as adequate records and documents, would include which of the following?

A)Manager approval of payroll prior to signing checks
B)Independent paymaster
C)Physical controls in areas where cash and paychecks are held
D)Paychecks are prepared on prenumbered checks

Question 48

The internal control process of requiring an independent paymaster, will help to minimize the risk of:

A)Fictitious employees
B)Incorrect amounts
C)Omitted paychecks
D)Timing issues

Question 49

When payroll is processed using batch processing, which of the following would not be part of the payroll process?

A)Human resources department would be responsible for keying employee information into the master file.
B)The timekeeper will accumulate all time sheets and enter them into the computer system in batches.
C)The timekeeper should prepare control totals and hash totals in order to check the system before the paychecks are generated.
D)Human resources should prepare control totals and hash totals in order to check the system before the paychecks are generated.

Question 50

Which of the following correctly states a reconciliation process to be completed related to payroll?

A)Time sheets reconciled to the payroll register.
B)Payroll register to the general ledger.
C)Time sheets to the production reports.
D)Production reports to the general ledger.

Question 51

In order to smooth out the payroll process and avoid the heavy workload that falls at the end of the payroll period, many companies will use this type of system - one that integrates their human resources and payroll functions.This system makes real-time personnel data available and the general ledger and production system can be automatically updated at the end of the payroll period.

A)Online Software Systems
B)Batch Processing
C)Electronic Timekeeping
D)Outsourcing of Payroll Services

Question 52

An electronic payroll time keeping device that collects time and attendance data when employees enter their time sheets is called:

A)Timekeeper
B)Paymaster
C)Electronic time clock
D)Badge readers

Question 53

There are many uses of electronic funds transfer related to the payroll process.Which of the following is not one of those uses?

A)Payments to the employees.
B)Payments to the federal taxing agencies.
C)Transfers to the payroll checking account.
D)All of the above are uses of electronic funds transfer.

Question 54

Types of fraud that may occur in the payroll function includes all of the following, except:

A)Overstated hours
B)Incorrectly computed tax withholdings
C)False claims of sick leave
D)Pay claims made by ghost employees

Question 55

Which of the following is NOT a benefit of the electronic transfer of payroll funds?

A)Ensures the timely deposit of funds into employee bank accounts
B)Eliminates the need for an independent paymaster
C)Removes the need for bank statement reconciliations
D)Saves time and check-cashing fees for employees

Question 56

The internal control process of requiring the payroll register to be reconciled with the time sheets, will help to minimize the risk of:

A)Invalid payroll transactions
B)Omitted paychecks
C)Duplicate paychecks
D)Fictitious employees

Question 57

Internal control activities within the payroll process, identified as authorization, would include which of the following?

A)Preparation of a bank reconciliation
B)Independent paymaster
C)Manager approval of payroll prior to signing checks
D)Physical controls in areas where cash and paychecks are held

Question 58

An electronic payroll time keeping device that collects data when employee identification badges are swiped through an electronic reader are called:

A)Timekeeper
B)Badge reader
C)Paymaster
D)Electronic time clock

Question 59

The internal control activity requiring that the manager approves payroll prior to signing paycheck is intended to minimize the risk of:

A)Omitted paychecks
B)Incorrect amounts
C)Fictitious employee
D)Stolen paychecks

Question 60

Conditions that warrant the need for strong controls relating to the payroll process include all of the following EXCEPT:

A)Irregular pay schedules
B)Complex withholding arrangements
C)Frequent changes in pay rates
D)Low employee turnover

Question 61

The record detailing the amounts and timing of depreciation for all fixed asset categories, except land and any construction-in-progress accounts, is called:

A)Fixed asset subsidiary ledger
B)Capital budget
C)Depreciation schedule
D)Depreciation method

Question 62

The three phases of fixed assets processes, that span the entire useful life of the assets, include all of the following, except:

A)Depreciation
B)Acquisition
C)Disposal
D)Continuance

Question 63

This phase of the fixed asset processes relates to discarding fixed assets when they become old, outdated, inefficient, or damaged.

A)Depreciation
B)Acquisition
C)Disposal
D)Continuance

Question 64

The security of assets and documents would include all of the following, except:

A)Supervisors need to make certain that the assets are being used for their intended purpose.
B)Designated members of management should be assigned responsibility for the disposal of any assets
C)Maintaining adequate insurance coverage
D)Electronic controls are needed to control access to automated records

Question 65

The first part of the strict approval process for high-dollar fixed assets is the investment analysis.Which of the following is part of that analysis?

A)Capital budget comparison
B)Review of the proposal
C)Financial justification
D)Written requisition

Question 66

Notable differences between the acquisition of fixed assets and the acquisition of inventory includes:

A)The placement of the acquired assets - user department for fixed assets, warehouse for inventory.
B)The inclusion of a fixed asset department instead of the inventory control department.
C)Both of the above.
D)None of the above.

Question 67

The fixed assets owned by a company are considered to be long-term because:

A)The high cost of the fixed assets demands that they not be considered short term.
B)They are purchased with the intent of benefitting the company for a long period of time.
C)The assets will last for a long period of time.
D)All of the above are reasons the fixed assets are considered to be long-term.

Question 68

Which of the following independent checks would be part of the internal controls for fixed assets?

A)Comparing actual fixed asset expenditures with the capital budget.
B)Periodic counts of fixed assets should be made by someone not otherwise responsible for fixed asset related activities.
C)Physical counts should be reconciled with the accounting records.
D)Book value of the assets should be compared to the insurance records.

Question 69

Activities involved with the fixed assets continuance phase of the fixed assets processes include all of the following, except:

A)Updating depreciation prior to the disposal of fixed assets
B)Updating cost data for improvements to assets
C)Adjusting for periodic depreciation
D)Keeping track of the physical location of the assets

Question 70

A detailed listing of the company's fixed assets, divided into categories consistent with the general ledger accounts is called a:

A)Fixed Asset Journal
B)Fixed Asset Subsidiary Ledger
C)Fixed Asset Schedule
D)Fixed Asset Budget

Question 71

This document is a financial plan detailing all of the company's investments in fixed assets and other investments.

A)Investment Analysis
B)Feasibility Study
C)Operating Budget
D)Capital Budget

Question 72

Which of the following is NOT a piece of relevant information that should be entered into the fixed asset subsidiary ledger upon the acquisition of a fixed asset?

A)Acquisition date
B)Cost
C)Useful life
D)The seller of the fixed asset

Question 73

Which of the following is a correct statement related to segregation of duties related to fixed assets?

A)Custody of fixed assets is to be separate from the related record keeping
B)Custody of fixed assets need not be separate from the purchasing of fixed assets
C)The IT function of programming need not be separated from the accounting for fixed assets.
D)All of the above are correct statements related to the segregation of duties.

Question 74

Which of the following correctly lists the correct chronological order of data flow in the fixed asset acquisitions process?

A)Prepare requisition; approve purchase; receive goods; prepare purchase order
B)Prepare purchase order; prepare requisition; receive goods; approve purchase
C)Prepare purchase order; prepare requisition; approve purchase; receive goods
D)Prepare requisition; approve purchase; prepare purchase order; receive goods

Question 75

Disposing of a fixed asset could include all of the following methods, except:

A)Throwing it away.
B)Sending it to another department.
C)Exchanging it for another asset.
D)Donating it to another party.

Question 76

When high-dollar fixed assets are purchased, there should be a strict approval process which would include three formal steps.Which of the following is not one of those steps?

A)Review of the proposal and specific approval by the appropriate level of management.
B)Investment analysis.
C)Comparison with the capital budget.
D)Feasibility study.

Question 77

Assets to be included in the fixed asset pool would include all of the following, except:

A)Vehicles
B)Furniture
C)Office Supplies
D)Real Estate

Question 78

Activities involved with the fixed assets disposal phase of the fixed assets processes include all of the following, except:

A)Adjusting periodic depreciation
B)Disposed assets are removed from the fixed asset subsidiary ledger
C)Gains or losses resulting from disposal are computed
D)The depreciation amounts related to the disposed assets are removed from the depreciation schedule and the fixed asset subsidiary ledger

Question 79

The internal control process of requiring management approval of fixed asset changes prior to recording the transaction, will help to minimize the risk of:

A)Incorrect amounts
B)Lost or stolen assets
C)Duplicate transactions
D)Omitted transactions

Question 80

This phase of the fixed asset processes relates to those required to maintain accurate and up-to-data records regarding all fixed assets throughout their useful lives.

A)Depreciation
B)Acquisition
C)Disposal
D)Continuance